Is the AI Boom a New Bubble? Lessons from the Dot‑Com Crash

Mark Tilbury

Summary Date: 2025-11-19 04:38:31

# Is the AI Boom a New Bubble? Lessons from the Dot‑Com Crash ### Introduction The narrator draws a parallel between the frenzy of the late‑1990s internet boom and today’s AI hype. By recalling personal experience of investing in tech stocks before the 2000 crash, he sets the stage for a warning about repeating history. ### The Dot‑Com Bubble Recap - 1998‑2000: Investors poured money into companies with catchy ".com" names. - Nasdaq fell ~80%; only 48% of dot‑com firms survived. - Even seasoned investors saw massive losses, highlighting how hype can mask fundamentals. ### The Rise of the “Magnificent Seven” - Seven firms now dominate the S&P 500 (≈36% weight): Amazon, Microsoft, Alphabet, Meta, Apple, Tesla, Nvidia. - All are locked in an AI arms race; owning a broad index fund means you are already heavily exposed to these stocks. - Their AI‑related capital expenditures for 2024 total roughly $330 billion, surpassing the GDP of small nations. ### AI Spending Arms Race - **Tesla:** $5 B on autonomous driving and XAI. - **Apple:** $10.7 B to upgrade Siri. - **Meta:** $60 B for data centers and the metaverse. - **Alphabet (Google):** $75 B to rebuild the internet with AI. - **Microsoft:** $80 B for OpenAI and supercomputers. - **Amazon:** $100 B for AWS infrastructure. - Global AI spend projected to hit $500 B by 2026; electricity demand for AI could exceed $3 T annually by 2030. - IMF estimates ~60% of developed‑world jobs are exposed to AI disruption. ### The “AI Money Machine” – Circular Financing - Chip designers (Intel, AMD, Nvidia) sell GPUs to AI developers (OpenAI, XAI) and data‑center providers (Oracle, CoreWeave). - Example flow: Microsoft funds OpenAI ($58 B) → OpenAI uses Microsoft data centers → Microsoft buys Nvidia chips → Nvidia invests back in OpenAI. - Such reciprocal transactions inflate revenue figures, artificially boosting stock prices. - Recent deals: OpenAI‑Oracle $300 B agreement, Oracle’s multi‑billion Nvidia chip purchases, Nvidia’s promise to invest up to $200 B back into OpenAI. - Result: Nvidia’s share price up ~1,600% since ChatGPT launch, benefitting from being the “shovel” seller in this ecosystem. ### Data Wall and Scaling Limits - AI models have consumed most publicly available text data; by 2027 they may have exhausted useful online content. - Without new data sources or fundamentally different learning methods, AI progress could stall, undermining the lofty valuations. - Humans learn from interaction, not just data ingestion, suggesting a possible path beyond the data wall but requiring breakthroughs. ### Comparing the AI Boom to the Dot‑Com Era - **Similarity:** Over‑optimism, massive capital inflows, geopolitical competition (US vs. China), and signs of overvaluation. - **Difference:** Today’s AI firms have tangible products and clearer revenue pathways (cloud services, advertising, enterprise licensing) compared with many dot‑coms that were valued on name alone. - Nonetheless, the narrator believes a bubble still exists due to overvaluation, revenue‑fabrication tactics, and scaling constraints. ### Investment Strategies for the Current Landscape 1. **Keep Investing Regularly** – Automate monthly contributions to low‑cost broad index funds; history shows markets recover over the long term. 2. **Boost Income** – Seek promotions, side hustles, or freelance work to increase cash flow, allowing you to buy assets at lower prices during downturns. 3. **Diversify Aggressively** – Allocate across stocks, bonds, gold, real estate, and crypto; consider dividend‑paying stocks for passive income during market stress. 4. **Avoid Debt & Over‑Leverage** – Maintaining a clean balance sheet protects you from forced selling when markets tumble. 5. **Stay Informed** – Monitor AI spending trends, corporate earnings, and macro‑economic signals to adjust exposure to the “Magnificent Seven.” ### Final Thoughts History may not repeat exactly, but it often rhymes. Recognizing the forces behind today’s AI frenzy can help investors navigate potential volatility without panic. The AI boom mirrors the dot‑com craze in its hype and capital concentration, but its ultimate outcome hinges on whether AI can deliver sustainable profits and overcome data‑scaling limits. By staying diversified, investing consistently, and avoiding leverage, investors can protect themselves from a possible bubble burst while still participating in long‑term market growth.

Full Transcript

I want you to imagine for a moment that
you started investing in 1998. The
world's going mad for the internet. New
companies are popping up out of nowhere
and every investor is convinced they
found the next big thing. So you take
all your money and invest it in a few
tech stocks just because they have
catchy.com names. And for a couple of
years, your money keeps going up and up
and everyone thinks you're a genius
until the year 2000.
>> Nothing short of breathtaking. A points
drop never before seen on the US
markets. Traders and investors shell
shock and spare a thought for Bill
Gates. The Wall Street collapse cost the
world's richest man 1.8 billion this
week alone. When the bubble burst, the
Nasdaq fell nearly 80% and only 48% of
dot companies managed to survive. I
watched many of my friends lose millions
within a blink of an eye. And even
[music] though it was a crash I'd half
been expecting, my own investment still
took a hit. The crazy part is the
internet was the next big thing. But
even then, the overconfidence and hype
created one of the biggest bubbles in
history. So why am I telling you all
this? Well, fast forward to today, and I
can't help but feel that same energy
again. But this time, it's not driven by
the internet. [music] It's AI. People
are calling it a once-ina-lifetime
opportunity. And maybe they're right. Or
maybe [music] it's the same story
playing out all over again. History
doesn't repeat, but it rhymes. And every
generation thinks they found a new era.
But as John Templeton said, the four
most expensive words in investing are,
"This time is different." But is this
time actually different? [music] Well,
as over 7 million of you have started
investing because of my videos, I feel
responsibility to give you my honest
take on this situation. So before you
panic, let's take a step back and look
at the three hidden forces behind this
potential bubble, why they matter, and
what you can do to benefit from all this
mayhem.
Right now, the fate of the entire stock
market and your portfolio is being
decided by just seven companies. They're
called the magnificent seven. These are
Amazon, Microsoft, Alphabet, [music]
Meta, Apple, Tesla, and Nvidia.
together, they now make up around 36% of
the entire S&P 500, and they're all
locked in an arms race to dominate
artificial intelligence. So, even if you
only own one share of the S&P 500,
you're already betting on these
companies. And whether you realize it or
not, your future returns depend on how
this race plays out. Because every
dollar these companies invest sends
ripples through the whole market, from
chip makers to energy companies to your
index funds. And when you see how much
they're predicted to pour into AI this
year, you'll [music] understand why.
Let's go one by one. Tesla plan on
spending $5 billion on autonomous
driving and XAI, which is Elon Musk's
new AI startup. Apple $10.7 billion to
make Siri smarter. To be honest, it's
probably going to take more than that.
Meta, $60 billion on data centers and
the metaverse. Google $75 billion
rebuilding the internet with AI.
Microsoft $80 billion funding open AI
and supercomputers. And Amazon $100
billion on AWS to own the infrastructure
everyone else relies on. That's a total
of $330
billion in one year. To put that into
perspective, that's more than the entire
GDP of countries like Finland or
Portugal. All that money is going into
building the future. Some people are
even calling it the fourth industrial
revolution. I get it. This all sounds
pretty exciting. However, all of this
spending [music] seems to be what's
keeping the economy alive at the moment.
And without it, the US might already be
in a mild recession. So, the question
is, how long can it last? Well, it
doesn't seem to be ending anytime soon.
Global AI spending is expected to reach
$500 billion by the end of 2026 with
spending on power and resources for
electricity demand topping [music] $3
trillion annually by 2030. That's how
bad these companies want to win the AI
arms race. I mean, I can see why. The
International Monetary Fund estimates
[music] that about 60% of jobs in the
developed world are exposed to AI. This
means [music] they could be transformed
or replaced by automation in the coming
years. So, whoever manages to crack this
technology first will be rewarded with a
crazy amount of power. Mark Zuckerberg
even said if Meta end up misspending
$200 billion, it's [music] worth it
because if they move too slowly, they're
out of the competition. But this race
isn't just between companies [music]
anymore. It's between nations. The US
and China see AI as the key to global
dominance, and they're both burning
through billions to make sure they're
the ones holding the reigns. For
everyday investors, this could go two
different ways. If AI delivers on its
promise, the next decade of investing
could be just like the internet boom of
the 2000s. But if the profits don't
arrive fast enough, the same stocks
pumping up your investment portfolio
today could drag it down tomorrow. But
where is all this money coming from?
Well, that brings us on to.
When I first saw what I'm about to show
you, my mind was [music] blown. But
before we dive in, if you're finding
this video useful and you've been
subscribed to me for a while, then I
just wanted to let you know I'm working
on something really exciting that a few
of you will be able to try out for free.
It's a platform that help you grow your
wealth. There'll be lots of in-depth
videos on there about investing and side
hustles, as well as the opportunity to
ask me questions directly. So, if you'd
like to get exclusive early access and
the opportunity to try it out for free,
then I'll leave a link in the
description below where you can sign up
to the wait list. With that said, back
to this. It's being referred to as the
AI money machine. It's the main reason
I'm starting to get worried about the
state of the AI industry. So, let's rub
some of these arrows out [music] and
walk you through how it all operates.
Intel, AMD, and Nvidia are the companies
that design the chips [music] that power
the AI models. Open AAI and XAI and
other smaller players are the companies
that buy these chips. Then you have
Oracle and Coreweave. These are the data
centers who also buy these chips, then
lease out the computing power to the AI
companies. Think of them like the
middlemen. At first glance, nothing
seems out of the ordinary. But once you
look at how these companies actually
work together, the red flags start
jumping out. It started when investors
at Microsoft gave OpenAI $58 billion in
funding. OpenAI then paid that back to
Microsoft to use their data centers.
Microsoft then used that money to buy
Nvidia chips. Nvidia then invested that
back into Open AI. Doing this allows
each company to record that flow as
revenue, which of course pushes their
stock prices up. It's kind of like if I
went out into the woods with a friend
and paid him $1,000 to dig a hole. Then
he paid me $1,000 to fill it back
[music] in. We then both have $1,000 in
revenue. Now, if we were valued like
Open AI, which is currently trading at
more than 40 times its revenue, [music]
that would mean our whole digging and
filling business would be worth over
$40,000 each. Obviously, I'm heavily
simplifying things here. These companies
aren't just passing around the same
money. However, the idea remains the
same, [music] and this has only been
getting crazier recently with OpenAI
announcing a deal worth of $300 billion
with Oracle. After this, Oracle said
they would spend tens of billions on
Nvidia chips. Then, Nvidia agreed to
invest up to $und00 billion back into
[music] Open AI. But to unlock that
investment, Open AAI [music] has to buy
more of their chips. Nvidia are
definitely the real winners here. Their
share price is up 1,600%
since Chat GPT launched. And they sell
their chips to everyone. I'm talking
Microsoft, Meta, Google, Amazon, Open
AI, and even Oracle. Then they invest
back into the same companies that buy
its products. This is like paying your
customers to buy your product and could
be artificially boosting the demand for
their chips. Do you see how messy this
is all getting? Let me try and simplify
it. Nvidia [music]
sells the shovels. Oracle provides the
land. Open AAI digs the quarry. [music]
And they're all helping each other to
lure people into the mines, but nobody
struck gold yet. I mean, Open AI is
currently valued at $500 billion, but
it's only making roughly 12 billion in
revenue. It's losing money every month.
Now, that's the main problem I see with
all of this. AI services are just not
making enough money. So will these AI
companies ever make the kind of profit
needed to justify their stock prices?
[music] Well, it is possible as they do
still have some huge levers they can
pull. I mean each week over 700 million
people are using chat GPT. That's a huge
amount of attention and even more
importantly an enormous amount of data
about all of us. Imagine when Sam Alman
turns on ads and allows companies to use
chat GPT to recommend their products
directly inside our conversations.
>> [music]
>> It could be like nothing we've ever seen
before. In addition to this, Open AAI
has surprisingly announced that it will
start to allow erotica in its chats for
verified adults, which of course is a
huge industry. Not that I know anything
about that. On top of that, these AI
companies are building systems that are
aiming to undercut the human workforce.
They're betting that once corporations
become dependent on AI, they'd have no
choice but to keep paying [music] no
matter the cost. And that's when the AI
companies could hike prices skyhigh and
finally cash in. So there's no doubt
these AI companies are valuable. But
much of that value still depends on one
thing. The belief that progress will
keep accelerating. And that leads us on
to
[music]
AI has been improving at a breakneck
speed for the past couple of years. I
mean, we've gone from an AI video that
looks like this to this. It's funny that
Will Smith eating spaghetti has become
one of the ways we now judge AI's
improvement. The stock market is relying
heavily on the rapid rate of improvement
to continue. However, we're not far off
hitting something called the data wall.
For years, AI has been devouring every
scrap of public data available. By 2027,
it's expected to have consumed nearly
all human generated online content. It's
like climbing a ladder in a game of
snakes and ladders. Everyone assumes the
ladders will keep going, but we're
running out of data to climb. So, we
might have to start moving square to
square instead. I mean, just think how
long the data sets that we're feeding AI
have taken to build. [music] Centuries.
No wonder progress seems to have been so
rapid as we've been feeding it books,
research, and data going all the way
back to the dinosaurs. And I'm not
talking about me. If AI companies can't
find a way to scale beyond the data
wall, we could see progress slow down.
expectations collapse and the bubble
many investors are banking on finally
bursting. But is beating the data wall
actually possible potentially. Think
about it. Humans don't have to worry
about this data limit. That's because we
don't just learn from being fed data.
[music] We learn from interacting with
the world. I mean, if AI tried to make
this video, it couldn't. It hasn't lived
my life, had my conversations, or made
my investing mistakes. My perspective
comes from my experience, which is
something AI can't simulate. So, in my
opinion, scaling past the data wall is
possible, but it isn't just a question
of more data. It's a question of
different data. But look, I'm not a
scientist. So, let's get back to
investing in the stock market. That
brings me on to [music] So, I started
this video by comparing what's happening
now to the dot bubble of the late 1990s.
However, is it actually the same? No,
not entirely. The main difference is
that these AI companies have real
utility and a clear path to [music]
profits. How big those profits will end
up being remains to be seen. However,
it's a much better situation than the
dot bubble where companies were getting
their crazy valuations from fancy names
alone. So, does that mean it's not a
bubble? Well, honestly, I still think it
is. The signs are all there.
overvaluation, faking revenue,
geopolitical mania, and scaling [music]
limits. However, there's no way of
telling what stage we're in. This could
be the start of a [music] decade of
crazy investment or closer to the end
than we realize. So, what's the best
thing to [music] do with your money?
Well, I'm not a financial advisor.
However, these are the things I'd be
focusing on if I were you. Firstly,
continuing to invest. If we're at the
start of the bubble, then the prices
we're seeing right now could seem like
bargains in a couple of years time.
That's why it's so important to set up
an automatic investment that leaves your
account every month and goes into a
broad lowcost index fund. I did this
during the com bubble. And although my
investments took a hit when the bubble
burst, I don't regret a thing as over
time the market bounced back as
historically [music]
it always has. The real secret is not to
panic when your portfolio goes down. As
long as you're investing in an index
fund that tracks the overall stock
market, then continuing to invest for a
crash could be the best thing you ever
do. That's how I ended up making
millions from the dot bubble bursting.
But in order to do this, you need to
make sure you're not in debt or
overleveraging yourself. This is exactly
why my friends lost millions while I
[music] was able to keep investing. The
next thing I'd do is use the link in the
description to sign up for free early
access of my new wealthb buildinging
platform so you can ask me questions
directly. I'm only joking, but
seriously, you should do it. Secondly,
focus on increasing your income. Your
income is the fuel you're using to grow
your wealth. So, if you can increase it
by getting a promotion or starting a
side hustle, then that's going to
supercharge your returns, especially if
you can do this while the stock market's
falling because you'll be picking up
some bargains. [music]
Thirdly, focus on diversification.
Putting all your money into one type of
investment is a recipe for disaster. The
key to surviving market bubbles is
diversification. This means spreading
your money across different types of
assets. My portfolio includes stocks,
[music]
bonds, precious metals like gold, real
estate, and even cryptocurrency. It's
also worth considering dividend [music]
paying stocks as they actually perform
well during downturns because they
generate passive income even when prices
are low. Just remember this bubble
bursting won't be the end of the world.
If you understand situations like this,
then you won't be the one panicking and
you'll be the one taking advantage of
the opportunities while everyone else is
running for the exit. If you want to
learn how to benefit from a recession,
then I'm going to leave that video right
up there. But don't click on it just
yet. Make sure to subscribe if you want
to grow your wealth. Okay, I'll see you
over

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